As Republicans prepare to undo the Affordable Care Act, defenders of the law warn that repeal will leave millions of seriously ill people unable to buy health insurance. President Obama claims repeal will mean going back to discriminating against Americans with pre-existing conditions.
In truth, ObamaCare discriminates against healthy people who have to buy their coverage in the individual market. ObamaCare forces them to pay the same price as the chronically ill, whose medical costs are ten times as high, on average.
One state acted quickly in June to rectify the unfairness: Alaska. Fortunately, the new administration appears ready to do the same.
In Alaska, the cost of caring for just 500 chronically ill patients was making premiums unaffordable for all 23,000 Alaskans enrolled in the state’s ACA plans. As healthy people refused to enroll, too few were left to shoulder the burden of the seriously ill. That threatened to push up premiums 40 percent for 2017. It’s a microcosm of what’s happening across the nation.
To halt Alaska’s insurance death spiral, state authorities agreed to pay for the care of the highest cost patients. In effect, Alaska created a separate high-risk pool for the sickest.
The cost of caring for people in this pool — a staggering $55 million — would be shared by all Alaska taxpayers, instead of being thrust on the small number of people using the individual insurance market. As a result, premiums will only rise seven percent for 2017.
It’s a lesson for the nation.
Under ObamaCare, healthy people pay premiums, but seldom meet their sky-high deductibles ($6,000 or more per person for the bronze plan). Instead, their premiums pay for the chronically ill. No wonder fewer than half of those eligible for ACA plans signed up. Millions opt to incur penalties for being uninsured instead.
ObamaCare apologists like Jonathan Gruber and Ezekiel Emanuel say the remedy is higher penalties. “You can’t cover Americans with pre-existing conditions without requiring healthy people to sign up,” writes Paul Krugman. Nonsense.
There’s a fairer way — high-risk pools. They’re featured in every Republican replacement for ObamaCare — including the plan offered by Donald TrumpDonald TrumpCheney says a lot of GOP lawmakers have privately encouraged her fight against Trump Republicans criticizing Afghan refugees face risks DeVos says 'principles have been overtaken by personalities' in GOP MORE’s newly nominated HHS Secretary, Rep.Tom Price.
The goal is to avoid foisting the cost of the seriously ill on buyers in the individual insurance market.
Some of the GOP proposals guarantee that people who maintain continuous coverage can remain in the individual market even if they develop grave permanent illnesses. Lawmakers should reconsider that idea. Funding care for the chronically ill in high-risk pools ensures lower premiums and deductibles for everyone else.
It’s the skewed nature of medical consumption that makes these separate risk pools necessary. Five percent of the population consumes half the nation’s healthcare. Federal data show that for the most part, the same people have the highest healthcare costs year to year.
Federal and state experience can help us predict how many people would need coverage in high-risk pools and what the cost will be. A report by the House Committee on Energy and Commerce in 2010 found that before ObamaCare, as many as 250,000 a year were turned down for health reasons by the major health insurers. That’s roughly the same number of people — 226,000 — who enrolled in high-risk pools in 35 states before the ACA.
After the ACA was passed in 2010, the federal government established a temporary high-risk pool for people not being served by the state polls, and it enrolled another 135,000.
In all, estimating generously about 500,000 people would likely need high-risk pool coverage after ObamaCare is repealed.
That’s a far cry from the Obama administration’s claim that 129 million Americans with a pre-existing condition could be denied coverage.” That inflated number exaggerates what medical conditions trigger a coverage denial. More important, it assumes that the entire nation would have to buy coverage in the individual market. The vast majority of people get insurance through an employer (155 million) or a public program (130 million), where pre-existing conditions don’t matter.
What about cost? High-risk pools will offer meaningful protection only if they are adequately funded. Before ObamaCare, many state high-risk pools were under-funded, which left sick uninsured people on waiting lists. Rep. Price’s plan proposes $1 billion a year to subsidize state high-risk pools, and Speaker Ryan’s plan proposes $2.5 billion a year. In fact, at least $16 billion yearly will be needed. That figure assumes 500,000 people covered at an estimated cost of $32,000 — the average cost experienced by the temporary federal risk pool established under the ACA.
Although $16 billion sounds like a fortune, it’s less than half the $43 billion budgeted for 2016 for ObamaCare plan subsidies. The lion’s share of that $43 billion ultimately ends up paying for care of the same sick people.
Funding healthcare for the seriously ill in separate “high-risk” pools will restore the viability of the individual insurance market. Healthy people will be able to buy coverage at lower prices that reflect their own expected health needs. That’s a fair deal for the very ill and the healthy.
Betsy McCaughey is author of “Beating Obamacare” and a senior fellow at the London Center for Policy Research.
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